City National Bank to pay $31M redlining settlement

Dive Brief:

Los Angeles-based City National Bank, a subsidiary of Royal Bank of Canada, agreed to pay a record $31 million settlement with the Justice Department over allegations the bank engaged in lending discrimination, or redlining, from 2017 through at least 2020, federal officials announced Thursday.
City National avoided providing mortgage-lending services to majority-Black and Hispanic neighborhoods in Los Angeles County over a four-year span and discouraged residents in these neighborhoods from obtaining mortgage loans, the DOJ alleged.
The consent order, which the DOJ said represents the largest redlining settlement in the department’s history, follows an October 2021 multiagency effort to crack down on the denial of financial services on the basis of race or in low- to moderate-income neighborhoods.

Dive Insight:

In its complaint, the DOJ alleges other banks received more than six times as many applications in majority-Black and Hispanic neighborhoods in Los Angeles County than City National each year.

The $95 billion-asset bank opened just one branch in a majority-Black and Hispanic neighborhood in the past 20 years, despite having opened or acquired 11 branches during that time period, according to the DOJ.

City National also neglected to assign a mortgage loan officer to that branch, unlike at its branches in majority-White areas, the department said.

As part of the DOJ settlement, City National agreed to invest $29.5 million in a loan subsidy fund for residents of majority-Black and Hispanic neighborhoods in Los Angeles County. An additional $1.75 million will go toward advertising, outreach and financial education in majority-Black and Hispanic neighborhoods, as well as efforts to help increase access to residential mortgage credit in such neighborhoods, the DOJ said.

City National also agreed to open one new branch in a majority-Black and Hispanic neighborhood and evaluate additional opportunities for expansion within Los Angeles County.

The bank will also ensure at least four mortgage loan officers are dedicated to serving majority-Black and Hispanic neighborhoods and employ a full-time community lending manager who will oversee the continued development of lending in majority-Black and Hispanic neighborhoods, the DOJ said.

“The Justice Department will continue to build on our efforts to vigorously enforce federal fair lending laws and work to ensure that financial institutions provide equal opportunity for every American to obtain credit,” Attorney General Merrick Garland said in a statement Thursday. “In advance of what would have been Dr. Martin Luther King Jr.’s 94th birthday, it is a fitting time to reaffirm our commitment to that work, and to the pursuit of justice for all Americans.”

In a statement to ABC News, City National said it disagreed with the DOJ’s allegations, but supports the department’s efforts to ensure equal access to credit for all consumers, regardless of race.

“We are committed to ensuring that all consumers have an equal opportunity to apply for and obtain credit,” the bank said. “We stand proudly on our legacy of integrity, corporate philanthropy and commitment to the communities we serve."

In conjunction with the settlement, City National is proactively taking steps to expand its lending services in other markets around the country to provide greater access to credit in communities of color, the DOJ said.

Thursday’s settlement is the fourth redlining-related penalty to be handed down by the DOJ since the department, in lockstep with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency, stepped up efforts to crack down on the practice.

Mississippi-based Trustmark Bank settled in October 2021, at a penalty of more than $5 million.

Berkshire Hathaway-owned Trident Mortgage Co. agreed to pay more than $20 million in a July redlining settlement.

And in September, New Jersey-based Lakeland Bank agreed to pay more than $13 million to settle DOJ allegations that it engaged in redlining.

Since October 2021, the Combating Redlining Initiative has secured more than $75 million in relief for communities that have suffered from lending discrimination, Garland said.

“This settlement should send a strong message to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable when they fail to do so,” Assistant Attorney General Kristen Clarke, who leads the Justice Department’s civil rights division, said Thursday.